Question

Chadmark Corporation’s budgeted monthly sales are $5,000. Forty percent of its customers pay in the first month and take the 3 percent discount.

The remaining 60 percent pay in the month following the sale and don’t receive a discount. Chadmark’s bad debts are very small and are excluded from this analysis. Purchases for next month’s sales are constant each month at $3,500. Other payments for wages, rent, and taxes are constant at $900 per month.

Construct a single month’s cash budget with the information given. What is the average cash gain or (loss) during a typical month for Chadmark Corporation?

Answer 1

40% sales are collected in the month of sale.

Net cash receipts of current month's sales = sales amount * 40% * (1 - discount rate).

Net cash receipts of current month's sales = $5,000 * 40% * (1 - 3%) = $1,940.

B 1 Item Amount $ 1,940.00 $ 3,000.00 2 Sales collections - current month 3 Sales collections - previous month 4 - Purchases 5 - Rent, wages, taxes 6 Increase in cash during the month $(3,500.00) $ (900.00) 540.00

A B 1 Item Amount =5000*40%*(1-3%) 2 Sales collections - current month 3 Sales collections - previous month 4 - Purchases =5000*60% -3500 5 - Rent, wages, taxes 6 Increase in cash during the month |-900 |=SUM(B2:B5)